Recently I was three days late in paying a $200 credit card bill, and that delinquency cost me $31.68. That’s 16 percent for three days, or an annual rate of 1936 percent.
Okay, so most of the penalty was a $29 late fee, not interest. Still, it does illustrate what a lucrative business credit cards have become, and why you get a solicitation in every day’s mail. Some of the mailers even include make-believe credit cards, so that you can see how cool your own Citibank card would look in your wallet. You probably throw the mailer in the waste basket, but they knew you might do something like that, so, when you turn on the television, there they are again, in the form of a sorry character asking you, “What’s in your wallet?” the message being that if it’s not a Capital One credit card you are doomed.
The fly in the credit card ointment, from the issuers’ point of view, is that some people always pay their full balance as soon as they get their bills. If everyone did that, the whole business would collapse. Credit-card companies, after all, are in the business of lending money. They are not in the business of providing a no-charge service to you. This is why, when you open your monthly statement, the number most prominently displayed is not your total balance, but the minimum payment now due. Minimum-payment payers are treasured by the banks, full-balance payers accursed, for obvious reasons.
If you persist in ignoring the “minimum payment“ box and paying off your full balance, the bank has another trick in the envelope: ready-to-cash checks, with your name printed in genuine ink. How can you resist what looks like free money? Are you going to tear up those checks and throw them out, after someone has gone to the trouble of printing your name on them?
What’s a credit-card company going to do about these deviants who insist on paying off their full balances even though they don’t have to, and who throw away preprinted checks? Strong measures are called for, and one of these days you may receive a letter from your credit card company, going something like this:
“It has come to our attention that for some time you have chosen not to use the credit facility our institution offers. Therefore, we must regretfully inform you that if you continue to pay your bills on time each month, your account may be terminated.”
Today’s economic model, for better or worse, is driven, not by people with perfect credit ratings, and not by out-and-out deadbeats. It is driven by people who can get credit cards but can’t keep up with the payments. Whoopee.
